Pre-Commercial Procurement (PCP)
From FP7 WP2013 into H2020
Lieve Bos
(lieve.bos AT ec.europa.eu)
European Commission
DG CONNECT F2 unit (“Innovation”)
Rationale
RTD expenditure as % of GDP
3,5
3
2,5
2
1,5
1
0,5
0
 Public sector is faced with
important challenges. Often
public sector transformations
require innovative solutions,
and forward looking public
procurement strategies
 However, public procurement of
R&D is underutilised in EU
versus other parts of the world
EU
US
R&D Procurement
Basic +applied R&D funding

Public expenditure in Europe is
higher than in other parts of the
world (47% of EU-25 GDP)

But 20 times less is spent on
preparing the public sector for
future challenges: R&D
procurement in EU (~2,5 Bn€)
versus US (~50Bn€)
PCP Pre-Commercial Procurement
 When
– Challenge requires R&D to get new solutions developed. Problem
clear, but pros / cons of several potential competing solutions not
compared / validated yet. No commitment to deploy (PPI) yet.
 What
– Public sector buys R&D to steer development of solutions to its
needs, gather knowledge about pros / cons of alternative solutions,
to avoid supplier lock-in later (create competitive supply base)
 How
– Public sector buys R&D from several suppliers in parallel (comparing
alternative solution approaches), in form of competition evaluating
progress after critical milestones (design, prototyping, test phase),
risks & benefits of R&D (e.g. IPRs) shared with suppliers to
maximise incentives for wide commercialisation
PCP and PPI
complementary
 Smart PCP/PPI combination enabling:
– Price/quality products that better fit public sector needs
– Better take-up/Wider commercialisation of R&D results
–
Price/quality products that better fit public sector needs
–
Earlier customer feedback for companies developing solutions
–
Better take-up/Wider commercialisation of R&D results
Public Procurement of
Innovative Solutions (PPI)
R&D / Pre-commercial Procurement (PCP)
Phase 0
Curiosity
Driven
Research
Phase 1
Solution design
Phase 2
Prototype
development
Supplier A
Phase 3
Original development
and testing of ltd volume
of first products
(COM/2007/799 &
SEC/2007/1668)
Supplier B
Supplier B
Supplier C
Supplier C
Supplier D
Supplier D
Supplier B
Supplier D
Phase 4
Deployment of commercial
end-products
Diffusion of newly developed
products / services
Supplier(s)
A,B,C,D
and/or X
Also normally multiple sourcing
here to keep competition going
PCP Win-win for all
stakeholders
Politicians
Suppliers
- Better products
- Economies of scale
- Wider market size
- Shorter Time to market
-First buyer in early R&D
-Shared risks & benefits
- Quality of public services
- Focus on political priorities
- New lead markets
- Improve innovation climate
- Increase export
- Global competitiveness - Attract foreign investment
- Increase employment
Pre-commercial
Procurement
Get the ‘Best Product’…
- Address ‘public market innovation failure’
- Shape product development to public needs
- Increase technology knowledge
- Reduce risk in commercial tendering
- Favour supplier competition
- Reduce cost of procurement
- Reduce risk of innovation
… at the ‘Lowest Price’
- Pooling of resources
- Economies of scale
- No licensing costs
- ‘First time right’ product
- ‘EU interoperable’
- Attractive to venture capitalists
- Reduce unforeseen expenditure
Procurers
Example PCP-like project in
Healthcare
www.nic.nhs.uk
Potential £160m
p.a. saving
Potential £19m p.a. saving
Potential £30m p.a. saving
£4,000 per HCAI avoided
Potential £17m p.a. saving
6
Potential Value to NHS:
 The NIC has supported the development of innovations to improve the quality of the
patient experience and generate significant cost savings to the NHS (£236m).
Value to the economy:
 With the support of the NHS National Innovation Center (NIC), a number of
innovations have been able to attract significant funding (£290m).
PCP example on CO2 emissions
Carbon capture – Norway
Statoil/Gassanova



Regulatory requirement to seriously reduce CO2 emissions by 2016 without negative effects
on health/environment, beyond what market is able to offer
PCP started in 2011, currently comparing solution approaches of 5 vendors, time-to-market
shortened
Follow-up procurement for deployment foreseen for 2014 (open to whole market again)
Status of PCP implementation
across Europe
Update November 2012 status
Framework identified
Awareness Raising Working on and/or pilots
Exploring possibilities framework in preparation
SILVER
Malta
Latvia Slovenia
Romania
Greece
Cyprus
Bulgaria Estonia
Luxembourg
Slovakia
Czech Republic
Switzerland
Pilots
started
Denmark
V-CON
Iceland
Sweden
Ireland
Lithuania
Finland
Poland
Spain
CHARM
Netherlands
UK
Belgium
Hungary
France
Portugal
Italy
Austria
Germany
SMART@FIRE
Norway
Projects in dotted-line are cross-border EC funded PCPs:
SILVER: EC co-funded PCP pilot started January 2012 (Supporting Independent Living of Elderly through Robotics)
CHARM: EC co-funded PCP pilot started September 2012 (Common Highways Agency Rijkswaterstaat Model)
V-CON: EC co-funded PCP pilot started October 2012 (Virtual Construction of Roads)
SMART@FIRE: EC co-funded PCP pilot started November 2012 (Integrated ICT solutions for Smart Personal Protective
Equipment for Fire Fighters and First Responders)
More Info about national PCP initiatives in Member States: http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html
More info about EU funded cross border PCP projects: http://cordis.europa.eu/fp7/ict/pcp/projects_en.html
Wp2013 calls in FP7/CIP
Cross-border PCPs & PPIs
EC co-financing for
in ICT sector
€32,5 M of EC support for cross-border PCPs in FP7-ICT-2013
An open call for joint PCPs addressing any area of public interest (CP-CSA for PCP grants)
Objective 11.1, Call 10: Proposals for joint PCPs can relate to for example public sector needs for
new ICT solutions in healthcare, inclusion, e-government, transport, energy efficiency,
environment, security, education etc (€4M: 1 project)
Targeted calls for joint PCPs in specific areas of public interest (CP-CSA for PCP grants)
Objective 5.1.(d), Call 10 - Personalised Health - Active Ageing (€8M)
up to 1 on personalised care for co-morbid patients
up to 2 on mobile ehealth services
Objective 11.3, Call 10 - High quality cloud computing for public sector needs (€10M: 1 project)
Objective 11.2, Call 11 - More efficient, affordable digital preservation (€5M: up to 2 projects)
Objective 8.2, Call 11 - Technology enhanced learning (min €5,5M)
Call deadlines: call 10 (15 Jan 2013), call 11 (16 April 2013)
€10 M of EC support for cross-border PPIs in CIP-ICT PSP-2013 (EC proposal)
Targeted calls for cross border PPIs in specific areas of public interest (PPI pilot grant)
Objective 3.2 – ICT for health and active ageing
€5M for one or more projects in ehealth,
€5M for one or more projects in ICT for active ageing
Call opens January 2013: Call deadline May 2013 (tbc)
CP-CSA for PCP grant
FP7-ICT-2013
 Support for consortia of public purchasers planning joint
cross-border PCP on topics of common European interest
- Bring radical improvements to the quality and efficiency
of public services with breakthrough solutions
Typical duration PCP project 3-4 years, projects WP2013 start end 2013
-> target solutions to be deployed 2017 at earliest
- Reduce fragmentation public sector demand and create
opportunities for leadership in new markets for industry
 EU contribution (CP-CSA): combination of
– CSA (max 30% of total grant): Reimbursement of eligible costs for preparation,
management and coordination of the joint PCP call for tender (100% funded)
– CP: Reimbursement of max 75% of the eligible costs for the development of the
new ICT solutions procured through the joint PCP (for financing the R&D to
be performed by the bidders selected via the joint PCP)
* CP-CSA = combination of CP and CSA funding within the same EC grant agreement
10
Conditions PCP calls
FP7-ICT-2013
 Min 3 mutually independent contracting authorities from 3 #
countries + other stakeholders (except potential suppliers)
 CSA part grant
– Defining joint specs + setting up/managing joint PCP procurement process
– Awareness Raising, experience sharing (incl. training for public purchasers),
dissemination of results, contribution to standards/regulation to remove
obstacles for introducing PCP innovations in the market
 CP part grant
– Execution of 1 joint cross-border PCP tender (addressing 1 jointly agreed
challenge, all procurers in consortium sharing the costs to finance R&D
together, one entity in consortium executing the PCP procurement)
– To explore possible alternative solution paths for the targeted improvements
in public sector services + testing of the solutions against a set of jointly
defined performance criteria.
 Funding regime
 CSA part: max 100% of coordination costs (max 30% of total grant)
 CP part: Max 75% of price for joint PCP procurement
 PCP only covers R&D, not deployment of commercial volumes of solutions
11
Funding rate for CP part
 Private entities that are potential suppliers of solutions for
the PCP in the CP part cannot participate as beneficiaries
 Private entities that are not potential suppliers, but buyers contracting authorities (CAs) under procurement directives can participate as beneficiaries
 Type 1 beneficiaries: CAs eligible for 75% rate in CP part
– Non profit ‘public’ bodies (e.g. local/regional/national authorities
considered contracting authorities under proc. Dir. 2004/18/EC)
– Secondary and higher education establishments and research orgs (in
their capacity as potential buyers, not suppliers of new solutions)
– SMEs (not potential suppliers but buyers of solutions, e.g. SMEs
owned/controlled by the public sector to provide public services that are
subject to public procurement directives)
 Type 2 beneficiaries: CAs eligible for 50% rate in CP part
– Other type of beneficiaries (e.g. ‘private’ larger-than-SME entities that
are not potential suppliers but buyers of solutions for the PCP and are
considered contracting authorities under procurement Directives: e.g.
large utilities subject to 2004/17/EC)
12
Funding rate for CP part
 If all project partners that are contributing financially to the
cost of the joint PCP are type 1 beneficiaries
– Then max reimbursement rate for costs under CP part = 75%
 If all project partners that are contributing financially to the
cost of the joint PCP are type 2 beneficiaries
– Then max reimbursement rate for costs under CP part = 50%
 If there is a mix of type 1 and type 2 beneficiaries that are
contributing financially to the cost of the joint PCP, the
maximum reimbursement rate for the PCP procurement cost
under the CP part will lie in between 50% and 75%
– and will be calculated taking into account that the maximum
reimbursement rates for the financial contribution of type 1
versus type 2 beneficiaries towards the total PCP procurement
budget is 75% versus 50% respectively.
13
Example CP-CSA
for PCP grant
How to use EC
PCP support?
 Example: €4 Mio CP-CSA for PCP grant


Max 30% (€1,2 Mio) for coordination costs - 100% funded
Other €2,8 Mio = EC contribution to the ICT R&D procured through the joint PCP
•
If type 1 consortium (75% rate) -> Total PCP value will be € 3,73 Mio (ex VAT)
•
If type 2 consortium (50% rate) -> Total PCP value will be € 5,6 Mio (ex VAT)
 Consortium brings €0,93-2,8 Mio (+VAT): divided over e.g. 5
procurers in e.g. 3 year PCP -> each procurer invests ~ €100K/Y
Comparing various solution approaches from different vendors, defragmenting market to get
in long run also cheaper large volume purchases, sharing R&D cost/experience with other
procurers & EC: joint PCP cheaper/procurer than buying R&D from one supplier on your own
€1-2M per supplier to do the R&D work
Phase 1: Solution design
~10-15% PCP budget
~100-250K/supplier
~4-10 suppliers
P1
P5
P2
Preparation
Joint PCP
P4
P3
One Joint
PCP call for
tender
Consortia of
contracting
authorities (CAs)
P1->P5 (min 3)
Phase 2: Prototyping
~30-40% PCP budget
~500-750K/supplier
~3-6 suppliers
Supplier A
Phase 3: Original development –
operational testing
~50-60% PCP budget
~800K-2,3M/supplier
~2-4 suppliers
Supplier B
Supplier B
Supplier C
Supplier C
Supplier D
Supplier D
Supplier D
Supplier E
Supplier E
Supplier E
Supplier B
Obj. 11.1 & App. 6: specific requirements for EC co-financed joint
cross-border PCPs
 Open dialogue with industry in preparation phase
– Announced widely, well in advance, at least in English
 EU wide publication PCP call for tender, at least in English
 All offers evaluated based on same objective criteria
– regardless of company size, geographic location of head office
 Use functional/performance based specifications
– not prescribing specific solution approach
 PCP covers phase 1 to 3, multiple companies in competition
– one framework contract/supplier with 3 specific contracts/phase
 Tenders awarded based on best value for money
(not just lowest price) and market price (no State aid)
 IPRs shared: ownership rights with companies, license free usage rights, right
to license, call back option, right to publish PCP results with procurers
 Support Europe 2020 objectives of growth and job creation
– Majority of R&D and operational activities related to PCP contract, including
principle researchers working on PCP contract in Europe*
 Avoid disproportionate qualification/financial guarantee
requirements: alternative (commercialisation plan in evaluation criteria)
* In EU Member States or Countries Associated to FP7
15
Important docs
proposal stage
CP-CSA for PCP
 Work Programme FP7-ICT-2013, Call fiche
– Every CP-CSA on PCP has to comply with requirements on the PCP
procedure explained in Objective 11 & Appendix 6
 Guide for Applicants for CP-CSAs for PCP !
– Guidance on how to prepare and evaluate proposals
– This is a GfA “specifically tuned” to the needs of CP-CSAs for PCP !
 COM/2007/799, SEC/2007/1668 and FAQs on PCP website
– Contains the basics: why and how PCP
Expression of interest form & online networking platform
ICT proposers day
– Can help to find partners beyond traditional FP participants
Pre-proposal check
– Provides feedback on draft pre-proposal
16
EC support to
PCP & PPI
 Today
– DG CNECT and ENTR (security) are piloting EC support to joint
cross-border PCPs done by min 3 public procurers from 3# MS/AC
•
FP7 CP-CSA grant, co-financing up to 75% of the cost of the procured R&D + up to
100% of the costs for preparing/coordinating/evaluating joint PCP
– DG ENTR and ENV are piloting EC support to joint/coordinated
cross-border PPIs. DG CNECT proposes similar in CIP PSP WP2013
(€10 Mio for PPIs in ICT for health/active ageing, done by min 3
public procurers from 3# MS/AC)
•
CIP grant, co-financing up to 20% of the cost of the innovative solutions procured /
deployed + up to 100% of the costs for preparing/coordinating/ evaluating PPI
 Horizon 2020 proposal (2014…)
– PCP & PPI new funding instruments available across entire H2020
– EC can co-finance PCPs/PPIs carried out by grant beneficiaries
– EC or EU funding bodies (e.g. agencies) can carry out PCPs/PPIs on
their own behalf or jointly with Member States
PCP/PPI synergies
for NCPs
 PCP and PPI similar target beneficiaries
• Identify contracting authorities with need/ambition to
innovate (CO2 reduction, etc) and R&I budget
• Foresee also the links with other demand side instruments
(regulation, certification, standardisation, user take-up subsidies/tax
incentives, etc)
• Get their interest to network with colleagues across Europe
(sharing costs with others to benchmark state-of-the art together,
exploring potential and preparing for cross-border PCPs & PPIs)
 Help explain benefits of PCP and PPI to procurers
• Quality/efficiency improvements public sector challenges
• Create opportunities for univs/ companies to work with first
potential customers in developing, testing and selling first
products
Background info
PCP website:
Info on calls, EU funded projects, background docs, FAQs, PCP
initiatives in Member States and Associated Countries etc
http://cordis.europa.eu/fp7/ict/pcp/home_en.html
Detailed info about PCP calls:
Calls page on PCP website links to all official call docs:
http://cordis.europa.eu/fp7/ict/pcp/calls_en.html
Info about PCP/PPI initiatives in MS and AC
http://cordis.europa.eu/fp7/ict/pcp/msinitiatives_en.html
Extra slides
currently open calls
More detailed info currently open calls
PCP